GST Council defines 'SUV' and sets criteria for tax
What's the story
The Goods and Services Tax (GST) Council has clarified the definition of SUVs in India, in a meeting held on Saturday.
The rugged vehicle category will now attract a higher tax rate and this will be uniform across all states.
Union Finance Minister Nirmala Sitharaman said that a higher compensation cess of 22% is applicable to SUVs that fulfill the criteria.
Context
Why does this story matter?
SUVs have become the most sought-after category of vehicles in India with a market share of more than 40% on our shores in FY-22. People are opting for SUVs for their rugged, go-anywhere nature.
By adding a uniform definition for the SUV segment for all states on our shores, the GST Council has managed to block various taxation loopholes that existed to date.
Definition
What exactly is an SUV?
According to the GST Council, any car that is popularly known as SUV, has an engine capacity exceeding 1,500cc, length exceeding 4,000mm, and ground clearance of 170mm and above will now be categorized as an SUV across all states in India.
Taxation
How much tax is applicable on an SUV in India?
If the criteria for engine capacity, length, and ground clearance of a vehicle meet the requirements of an SUV, a Goods and Services Tax (GST) of 28% and a Compensation Cess of 22% will be levied, taking the effective tax rate to 50%.
However, inconsistent definitions of the vehicle category across all states have always led to confusion amongst automakers in the Indian market.
clarification
Can sedans, MUVs be included in the higher cess bracket?
Vivek Johri, Chairman of the Central Board of Indirect Taxes and Customs said, "If cars do not meet any of these criteria, lower cess rate will be applicable."
He further added that an internal committee will also consider whether sedans and MUVs can be added under the higher cess threshold if they meet the criteria set for the SUV category.